Republican Paul E. Zeltner on Wednesday savored his upset victory in the 54th Assembly District, portraying himself as a political underdog who had defeated Assembly Speaker Willie Brown's handpicked candidate with an old-fashioned, "grass-roots" campaign.

Zeltner, 61, a Lakewood councilman, stitched together his victory over Edward K. Waters, his better-financed Democratic opponent, with what his supporters termed "a homespun campaign."

Indeed, he relied on volunteers walking precincts and raising money through pancake breakfasts, as well as endorsements from local council members, but he also received an infusion of cash from Los Angeles County Supervisor Deane Dana, who persuaded Zeltner to enter the contest.

Zeltner held a narrow lead throughout the night, but the former sheriff's captain went to bed after 2 a.m., still unaware that he would defeat the 31-year-old Waters.

Told as he arrived at a prayer breakfast about 7:30 a.m. Wednesday that he had defeated Waters by about 2,600 votes, Zeltner beamed and said that "after a long, long difficult struggle" he was "elated" by his victory.

He termed it an especially sweet victory because he had managed to win without much help from Assembly Minority Leader Pat Nolan (R-Glendale) and the Assembly Republican Political Action Committee, which Zeltner said channeled only $5,000 to his campaign.

Zeltner takes office next month, succeeding Assemblyman Frank Vicencia (D-Bellflower), who is retiring after 14 years in the Legislature. The district, which has a better than 2-to-1 Democratic registration edge, includes Bellflower, Compton, Lakewood, Paramount and parts of eastern Long Beach and Willowbrook, an unincorporated area northwest of Compton.

Both sides agreed that Zeltner seemed to outdistance Waters on his home turf of Lakewood and Bellflower, while Waters captured the Compton area--but by a smaller margin than anticipated. Waters moved to Compton early this year.

Further, a third candidate--Vikki Murdock, 38, the Peace and Freedom Party nominee--may have been the spoiler in the election because she received 2,612 votes. That was roughly the margin of difference between Waters, who polled 33,659, and front-runner Zeltner's 36,309.

Because of a large registration bulge, the district has been regarded as a safe Democratic seat. Still, Waters' campaign spent an estimated $800,000--nearly half in the general election. In contrast, Zeltner estimated his total expenses at less than $150,000.

In the home stretch, the campaign turned nasty with Waters and Zeltner assailing each other's integrity. Waters bombarded voters with mailers questioning Zeltner's use of his city-issued credit card. In turn, Zeltner assailed Waters as a carpetbagger because he did not register in the district until February. Zeltner contended that Waters would be controlled by his mother, Assemblywoman Maxine Waters (D-Los Angeles) and her mentor, Assembly Speaker Brown (D-San Francisco).

Zeltner's victory is a setback for Brown--who saw the Republicans shave three seats from his 47-member Democratic majority in Tuesday's election. From the start of the campaign 10 months ago, Brown had enthusiastically promoted Waters and contended that a black candidate like the youthful Waters could win the predominantly white district.

The key to Waters' strategy was to win by a wide margin in primarily black and Democratic precincts in Compton and Willowbrook, where about 30% of the district's voters are registered.

But the big Compton vote never arrived, and shortly after 3:15 a.m. Waters conceded defeat at his Compton Boulevard headquarters by thanking his tearful supporters and taking a final swipe at Zeltner.

With his mother at his side, Waters told about 40 die-hard supporters that Zeltner "may be a one-term Assemblyman at best. I still believe he's not the best person for this job."

Nonetheless, Waters said: "I'm not torn apart. I'm not going to be destroyed. I'll get back up on my feet again." In fact, Waters said he might run for the Assembly in two years.

Waters said he did not have an explanation for what had soured the district's voters on him--he campaigned as a conservative who opposed the reconfirmation of California Chief Justice Rose Elizabeth Bird and in favor of the death penalty. In June, he emerged from political obscurity to lead a field of nine Democrats to win a bitterly contested primary.

In contrast, Zeltner had no primary opposition. But he harped on one theme--that he knows the district and its problems, labeling Waters the candidate of the Democratic leadership in Sacramento.

Waters acknowledged that voters found the local-issue theme attractive. Waters also suggested that his being black could have played a part in his loss but added, "how much of a factor it was in the 54th District I don't know."